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EMPLOYEE’S GUIDE TO UNDERSTANDING COBRA
What is COBRA continuation health coverage?
Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA)
health benefit provisions in 1986. The law amends the Employee Retirement Income
Security Act, the Internal Revenue Code and the Public Health Service Act to provide
continuation of group health coverage that otherwise might be terminated.
What does COBRA do?
COBRA provides certain former employees, retirees, spouses, former spouses, and
dependent children the right to temporary continuation of health coverage at group rates.
This coverage, however, is only available when coverage is lost due to certain specific
events. Group health coverage for COBRA participants is usually more expensive than
health coverage for active employees, since usually the employer pays a part of the
premium for active employees while COBRA participants generally pay the entire premium
themselves. It is ordinarily less expensive, though, than individual health coverage.
Who is entitled to benefits under COBRA?
There are three elements to qualifying for COBRA benefits. COBRA establishes specific
criteria for plans, qualified beneficiaries, and qualifying events:
Plan Coverage - Group health plans for employers with 20 or more employees on more
than 50 percent of its typical business days in the previous calendar year are subject to
COBRA. Both full and part-time employees are counted to determine whether a plan is
subject to COBRA. Each part-time employee counts as a fraction of an employee, with
the fraction equal to the number of hours that the part-time employee worked divided
by the hours an employee must work to be considered full time.
Qualified Beneficiaries - A qualified beneficiary generally is an individual covered by a
group health plan on the day before a qualifying event who is one of the following: an
employee, the employee's spouse, or an employee's dependent child. In certain cases, a
retired employee, the retired employee's spouse, and the retired employee's dependent
children may be qualified beneficiaries. In addition, any child born to or placed for
adoption with a covered employee during the period of COBRA coverage is considered a
qualified beneficiary. Agents, independent contractors, and directors who participate in
the group health plan may also be qualified beneficiaries.
Qualifying Events - Qualifying events are certain events that would cause an individual
to lose health coverage. The type of qualifying event will determine who the qualified
beneficiaries are and the amount of time that a plan must offer the health coverage to
them under COBRA. A plan, at its discretion, may provide longer periods of continuation
coverage.
Qualifying Events for Employees:
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Voluntary or involuntary termination of employment for reasons other than gross
misconduct
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Reduction in the number of hours of employment
Qualifying Events for Spouses:
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Voluntary or involuntary termination of the covered employee's employment for any
reason other than gross misconduct
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Reduction in the hours worked by the covered employee
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Covered employee's becoming entitled to Medicare
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Divorce or legal separation of the covered employee
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Death of the covered employee
Qualifying Events for Dependent Children:
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Loss of dependent child status under the plan rules
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Voluntary or involuntary termination of the covered employee's employment for any
reason other than gross misconduct
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Reduction in the hours worked by the covered employee
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Covered employee's becoming entitled to Medicare
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Divorce or legal separation of the covered employee
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Death of the covered employee
How does a person become eligible for COBRA continuation coverage?
To be eligible for COBRA coverage, you must have been enrolled in your employer's health
plan when you worked and the health plan must continue to be in effect for active
employees. COBRA continuation coverage is available upon the occurrence of a qualifying
event that would, except for the COBRA continuation coverage, cause an individual to lose
his or her health care coverage.
What group health plans are subject to COBRA?
The law generally covers health plans maintained by private-sector employers with 20 or
more employees, employee organizations, or state or local governments.
What process must individuals follow to elect COBRA continuation coverage?
Employers must notify plan administrators of a qualifying event within 30 days after an
employee's death, termination, reduced hours of employment or entitlement to Medicare.
A qualified beneficiary must notify the plan administrator of a qualifying event within 60
days after divorce or legal separation or a child's ceasing to be covered as a dependent
under plan rules.
Plan participants and beneficiaries generally must be sent an election notice not later than
14 days after the plan administrator receives notice that a qualifying event has occurred.
The individual then has 60 days to decide whether to elect COBRA continuation coverage.
The person has 45 days after electing coverage to pay the initial premium.
How long after a qualifying event do I have to elect COBRA coverage?
Qualified beneficiaries must be given an election period during which each qualified
beneficiary may choose whether to elect COBRA coverage. Each qualified beneficiary may
independently elect COBRA coverage. A covered employee or the covered employee's
spouse may elect COBRA coverage on behalf of all other qualified beneficiaries. A parent or
legal guardian may elect on behalf of a minor child. Qualified beneficiaries must be given at
least 60 days for the election. This period is measured from the later of the coverage loss
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date or the date the COBRA election notice is provided by the employer or plan
administrator. The election notice must be provided in person or by first class mail within 14
days after the plan administrator receives notice that a qualifying event has occurred.
How do I file a COBRA claim for benefits?
Health plan rules must explain how to obtain benefits and must include written procedures
for processing claims. Claims procedures must be described in the Summary Plan
Description. You should submit a claim for benefits in accordance with the plan's rules for
filing claims. If the claim is denied, you must be given notice of the denial in writing
generally within 90 days after the claim is filed. The notice should state the reasons for the
denial, any additional information needed to support the claim, and procedures for
appealing the denial. You will have at least 60 days to appeal a denial and you must receive
a decision on the appeal generally within 60 days after that.
Contact the plan administrator for more information on filing a claim for benefits. Complete
plan rules are available from employers or benefits offices. There can be charges up to 25
cents a page for copies of plan rules.
Can individuals qualify for longer periods of COBRA continuation coverage?
Yes, disability can extend the 18 month period of continuation coverage for a qualifying
event that is a termination of employment or reduction of hours. To qualify for additional
months of COBRA continuation coverage, the qualified beneficiary must:
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Have a ruling from the Social Security Administration that he or she became disabled
within the first 60 days of COBRA continuation coverage
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Send the plan a copy of the Social Security ruling letter within 60 days of receipt, but
prior to expiration of the 18-month period of coverage
If these requirements are met, the entire family qualifies for an additional 11 months of
COBRA continuation coverage. Plans can charge 150% of the premium cost for the
extended period of coverage.
Is a divorced spouse entitled to COBRA coverage from their former spouses’ group
health plan?
Under COBRA, participants, covered spouses and dependent children may continue their
plan coverage for a limited time when they would otherwise lose coverage due to a
particular event, such as divorce (or legal separation). A covered employee’s spouse who
would lose coverage due to a divorce may elect continuation coverage under the plan for a
maximum of 36 months. A qualified beneficiary must notify the plan administrator of a
qualifying event within 60 days after divorce or legal separation. After being notified of a
divorce, the plan administrator must give notice, generally within 14 days, to the qualified
beneficiary of the right to elect COBRA continuation coverage.
Divorced spouses may call their plan administrator or the EBSA toll-free number, (866) 444EBSA (3272) if they have questions about COBRA continuation coverage or their rights
under ERISA.
If I waive COBRA coverage during the election period, can I still get coverage at a
later date?
If a qualified beneficiary waives COBRA coverage during the election period, he or she may
revoke the waiver of coverage before the end of the election period. A beneficiary may then
elect COBRA coverage. Then, the plan need only provide continuation coverage beginning
on the date the waiver is revoked.
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Under COBRA, what benefits must be covered?
Qualified beneficiaries must be offered coverage identical to that available to similarly
situated beneficiaries who are not receiving COBRA coverage under the plan (generally, the
same coverage that the qualified beneficiary had immediately before qualifying for
continuation coverage). A change in the benefits under the plan for the active employees
will also apply to qualified beneficiaries. Qualified beneficiaries must be allowed to make the
same choices given to non-COBRA beneficiaries under the plan, such as during periods of
open enrollment by the plan.
When does COBRA coverage begin?
COBRA coverage begins on the date that health care coverage would otherwise have been
lost by reason of a qualifying event.
How long does COBRA coverage last?
COBRA establishes required periods of coverage for continuation health benefits. A plan,
however, may provide longer periods of coverage beyond those required by COBRA. COBRA
beneficiaries generally are eligible for group coverage during a maximum of 18 months for
qualifying events due to employment termination or reduction of hours of work. Certain
qualifying events, or a second qualifying event during the initial period of coverage, may
permit a beneficiary to receive a maximum of 36 months of coverage.
Coverage begins on the date that coverage would otherwise have been lost by reason of a
qualifying event and will end at the end of the maximum period. It may end earlier if:
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Premiums are not paid on a timely basis
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The employer ceases to maintain any group health plan
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After the COBRA election, coverage is obtained with another employer group health
plan that does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary. However, if other group health coverage is
obtained prior to the COBRA election, COBRA coverage may not be discontinued,
even if the other coverage continues after the COBRA election.
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After the COBRA election, a beneficiary becomes entitled to Medicare benefits.
However, if Medicare is obtained prior to COBRA election, COBRA coverage may not
be discontinued, even if the other coverage continues after the COBRA election.
Although COBRA specifies certain periods of time that continued health coverage must be
offered to qualified beneficiaries, COBRA does not prohibit plans from offering continuation
health coverage that goes beyond the COBRA periods.
Some plans allow participants and beneficiaries to convert group health coverage to an
individual policy. If this option is generally available from the plan, a qualified beneficiary
who pays for COBRA coverage must be given the option of converting to an individual policy
at the end of the COBRA continuation coverage period. The option must be given to enroll in
a conversion health plan within 180 days before COBRA coverage ends. The premium for a
conversion policy may be more expensive than the premium of a group plan, and the
conversion policy may provide a lower level of coverage. The conversion option, however, is
not available if the beneficiary ends COBRA coverage before reaching the end of the
maximum period of COBRA coverage.
Who pays for COBRA coverage?
Beneficiaries may be required to pay for COBRA coverage. The premium cannot exceed 102
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percent of the cost to the plan for similarly situated individuals who have not incurred a
qualifying event, including both the portion paid by employees and any portion paid by the
employer before the qualifying event, plus 2 percent for administrative costs. For qualified
beneficiaries receiving the 11 month disability extension of coverage, the premium for those
additional months may be increased to 150 percent of the plan's total cost of coverage.
COBRA premiums may be increased if the costs to the plan increase but generally must be
fixed in advance of each 12-month premium cycle. The plan must allow you to pay
premiums on a monthly basis if you ask to do so, and the plan may allow you to make
payments at other intervals (weekly or quarterly).
The initial premium payment must be made within 45 days after the date of the COBRA
election by the qualified beneficiary. Payment generally must cover the period of coverage
from the date of COBRA election retroactive to the date of the loss of coverage due to the
qualifying event. Premiums for successive periods of coverage are due on the date stated in
the plan with a minimum 30-day grace period for payments. Payment is considered to be
made on the date it is sent to the plan.
If premiums are not paid by the first day of the period of coverage, the plan has the option
to cancel coverage until payment is received and then reinstate coverage retroactively to
the beginning of the period of coverage.
If the amount of the payment made to the plan is made in error but is not significantly less
than the amount due, the plan is required to notify you of the deficiency and grant a
reasonable period (for this purpose, 30 days is considered reasonable) to pay the
difference. The plan is not obligated to send monthly premium notices.
COBRA beneficiaries remain subject to the rules of the plan and therefore must satisfy all
costs related to co-payments and deductibles, and are subject to catastrophic and other
benefit limits.
Note: If your qualifying event was involuntary termination of employment that occurred on
or after September 1, 2008 through December 31, 2009, you may be eligible for a premium
reduction under the American Recovery and Reinvestment Act of 2009.
If I elect COBRA, how much do I pay?
When you were an active employee, your employer may have paid all or part of your group
health premiums. Under COBRA, as a former employee no longer receiving benefits, you
will usually pay the entire premium amount, that is, the portion of the premium that you
paid as an active employee and the amount of the contribution made by your employer. In
addition, there may be a 2 percent administrative fee. While COBRA rates may seem high,
you will be paying group premium rates, which are usually lower than individual rates.
Since it is likely that there will be a lapse of a month or more between the date of layoff and
the time you make the COBRA election decision, you may have to pay health premiums
retroactively, from the time of separation from the company. The first premium, for
instance, will cover the entire time since your last day of employment with your former
employer.
You should also be aware that it is your responsibility to pay for COBRA coverage even if
you do not receive a monthly statement. Although they are not required to do so, some
employers may subsidize COBRA coverage.
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Note: If your qualifying event was involuntary termination of employment that occurred on
or after September 1, 2008 through December 31, 2009, you may be eligible for a premium
reduction under the American Recovery and Reinvestment Act of 2009.
I have heard about the new COBRA extension and subsidy that was contained in
the Stimulus package signed by the President. I would like more information.
The American Recovery and Reinvestment Act of 2009 expanded eligibility for COBRA and
provides a premium reduction to certain qualified individuals. Individuals eligible for COBRA
coverage who were involuntarily terminated by their employer on or after September 1,
2008 through December 31, 2009 who are eligible for COBRA and elect COBRA may be
eligible to pay a reduced premium amount that is only 35% of the premium costs for your
COBRA coverage.
If you were terminated during that period and were covered by your employer’s plan on
your last day of employment, your plan administrator should provide you a notice of your
eligibility to elect COBRA and to receive a premium reduction. You may also want to contact
your employer directly to ask about getting the premium reduction.
How can I apply for the COBRA premium subsidy?
Individuals eligible for COBRA coverage who were involuntarily terminated by their
employer on or after September 1, 2008 through December 31, 2009 who are eligible for
COBRA and elect COBRA may be eligible to pay a reduced premium amount that is only
35% of the premium costs for your COBRA coverage.
If you were terminated during that period and were covered by your employer’s plan on
your last day of employment, your plan administrator should provide you a notice of your
eligibility to elect COBRA and to receive a premium reduction. You may also want to contact
your employer directly to ask about getting the premium reduction.
I’ve been enrolled in COBRA and paying premiums prior to the enactment of the
American Recovery and Reinvestment Act of 2009. Can I get a refund of 65% of
the premiums I have paid prior to the law’s enactment?
The premium reduction provisions relate only to premiums for coverage periods beginning
after the new law was enacted on February 17, 2009. The law does not allow
reimbursement of premiums for coverage periods beginning before February 17, 2009.
Qualified individuals can, however, receive the premium subsidy going forward, for up to
nine months. Your plan administrator should provide to you a notice of your right to apply
for the premium reduction. You may also want to contact your employer directly to ask
about getting the premium reduction and how to reconcile any amounts you might have
overpaid after February 17, 2009.
Can I receive COBRA benefits while on FMLA leave?
The Family and Medical Leave Act, effective August 5, 1993, requires an employer to
maintain coverage under any group health plan for an employee on FMLA leave under the
same conditions coverage would have been provided if the employee had continued
working. Coverage provided under the FMLA is not COBRA coverage, and FMLA leave is not
a qualifying event under COBRA. A COBRA qualifying event may occur, however, when an
employer's obligation to maintain health benefits under FMLA ceases, such as when an
employee notifies an employer of his or her intent not to return to work.
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Further information on FMLA is available from the nearest office of the Wage and Hour
Division, listed in most telephone directories under U.S. Government, U.S. Department of
Labor, Employment Standards Administration.
What is the Federal Government's role in COBRA?
COBRA continuation coverage laws are administered by several agencies. The Departments
of Labor and Treasury have jurisdiction over private-sector health group health plans. The
Department of Health and Human Services administers the continuation coverage law as it
affects public-sector health plans.
The Labor Department's interpretive and regulatory responsibility is limited to the disclosure
and notification requirements of COBRA. If you need further information on your disclosure
or notification rights under a private-sector plan, or about ERISA generally, call EBSA's tollfree number at (866) 444-3272, or write to:
U.S. Department of Labor
Employee Benefits Security Administration
Division of Technical Assistance and Inquiries
200 Constitution Avenue NW, Suite N-5619
Washington, DC 20210
The Internal Revenue Service, Department of the Treasury, has issued regulations on
COBRA provisions relating to eligibility, coverage and premiums in 26 CFR Part 54,
Continuation Coverage Requirements Applicable to Group Health Plans. Both the
Departments of Labor and Treasury share jurisdiction for enforcement of these provisions.
The Center for Medicare and Medicaid Services offers information about COBRA provisions
for public-sector employees. You can write them at this address:
Centers for Medicare and Medicaid Services
7500 Security Boulevard
Mail Stop C1-22-06
Baltimore, MD 21244-1850
Tel 1.877.267.2323 x61565
I am a federal employee. Can I receive benefits under COBRA?
Federal employees are covered by a law similar to COBRA. Those employees should contact
the personnel office serving their agency for more information on temporary extensions of
health benefits.
Am I eligible for COBRA if my company closed or went bankrupt and there is no
health plan?
If there is no longer a health plan, there is no COBRA coverage available. If, however, there
is another plan offered by the company, you may be covered under that plan. Union
members who are covered by a collective bargaining agreement that provides for a medical
plan also may be entitled to continued coverage.
How do I find out about COBRA coverage and how do I elect to take it?
Employers or health plan administrators must provide an initial general notice if you are
entitled to COBRA benefits. You probably received the initial notice about COBRA coverage
when you were hired. When you are no longer eligible for health coverage, your employer
has to provide you with a specific notice regarding your rights to COBRA continuation
benefits.
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Employers must notify their plan administrators within 30 days after an employee's
termination or after a reduction in hours that causes and employee to lose health benefits.
The plan administrator must provide notice to individual employees of their right to elect
COBRA coverage within 14 days after the administrator has received notice from the
employer. You must respond to this notice and elect COBRA coverage by the 60th day after
the written notice is sent or the day health care coverage ceased, whichever is later.
Otherwise, you will lose all rights to COBRA benefits.
Spouses and dependent children covered under your health plan have an independent right
to elect COBRA coverage upon your termination or reduction in hours. If, for instance, you
have a family member with an illness at the time you are laid off, that person alone can
elect coverage.
For more information, or if you have additional questions, visit www.dol.gov/COBRA or call
(866) 444-3272 to speak to a Benefits Advisor.
Source: U.S. Department of Labor
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